GBP/USD traded about 0.2% lower near 1.3400 in late Asian trade on Friday, after pulling back from a weekly high. The US Dollar Index rose 0.3% to about 99.45 after rebounding from around 99.00, following an over 1% drop the prior day. The US dollar fell after several global central banks signalled that interest rate cuts are off the table, citing inflation risks linked to higher oil prices and Middle East conflict. Sterling rose on Thursday after the Bank of England held the Bank Rate at 3.75%, with all 9 MPC members voting to hold, versus expectations of a 7–2 split.

Technicals And Recent Price Action

On Thursday, GBP/USD rose nearly 1.3%, closing around 1.3430 after opening near 1.3250 and reaching about 1.3470, where the 38.2% Fibonacci retracement is a barrier. The move partially reversed a decline from the late-January high near 1.3870. The previous BoE decision in February was a 5–4 hold, while the Q3 inflation forecast was revised to about 3.5% from 2.0% in February, with staff also expecting 3.5% over the next two quarters. UK data showed ILO unemployment at 5.2% versus a 5.3% forecast, employment change at 84K, and earnings excluding bonuses at 3.8% versus 4.1%. We are looking back at the market shock from last year, when the Bank of England surprised everyone with a unanimous 9-0 vote to hold rates at 3.75%. The market was leaning towards rate cuts, and that single hawkish pivot sent GBP/USD soaring over 1.3% in one day. This serves as a critical reminder of how quickly sentiment can turn when inflation fears resurface. Fast forward to today, March 20, 2026, and we see a similar dynamic developing. The latest inflation data for February showed UK CPI is still stubbornly high at 2.9%, well above the BoE’s 2% target. Furthermore, wage growth remains persistent, with recent figures showing average earnings are still growing at an annual rate of 5.2%, creating underlying price pressures.

Derivative Trading Implications

This presents a potential opportunity for derivative traders, as the market is pricing in several interest rate cuts for the second half of this year. Given the sticky inflation data, there is a risk the Bank of England will delay these cuts, similar to how they held firm last year. Buying call options on GBP/USD could be a cost-effective way to position for another potential hawkish surprise from the central bank. The sharp rally we witnessed in 2025 also caused a significant spike in currency volatility. If the market is once again underestimating the BoE’s resolve to fight inflation, implied volatility in sterling options may be too low. This suggests that strategies designed to profit from a rise in volatility, particularly around upcoming Monetary Policy Committee meetings, could prove valuable in the weeks ahead. Create your live VT Markets account and start trading now.

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UK public sector net borrowing was £14.329bn in February. This was above expectations of -£8.5bn. The figures show a larger-than-forecast gap between public spending and income for the month. The release reports monthly borrowing in pounds and compares it with market expectations.

Implications For The Gilt Market

This surprise jump in government borrowing to £14.3 billion, far exceeding expectations, is a major signal for the gilt market. We expect this to increase the supply of UK debt, which should push bond prices down and yields higher in the coming weeks. Derivative traders should consider short positions on long-dated gilt futures to capitalize on this expected rise in yields. The Bank of England will watch this closely, as higher government spending could complicate its plans to cut interest rates later this year. Last month, the market was pricing in a 75% chance of a rate cut by August 2026, but that probability will now likely decrease. We see value in positions that bet on interest rates staying higher for longer, perhaps by selling Sterling Overnight Index Average (SONIA) futures. For the pound, this news creates a two-way risk, making volatility plays in the currency markets attractive. Higher gilt yields could attract foreign investment and support Sterling, but concerns over the UK’s fiscal health may ultimately weaken it. Traders could look at buying options like straddles on GBP/USD, which profit from a large move in either direction without betting on which way it will go. UK stocks, particularly in the FTSE 100, are likely to face headwinds from this development. Higher bond yields make equities a less attractive investment by comparison, and worries about the underlying economy could hurt corporate earnings. We believe purchasing put options on the FTSE 100 index could be a prudent way to hedge against or profit from a potential market dip in April.

Historical Context And Market Sensitivity

We remember the market sensitivity to fiscal figures after the revised OBR forecasts in autumn 2025 caused a spike in gilt yields. This February 2026 borrowing overshoot is the largest surprise for this month since the pandemic era of 2021, showing a significant deviation from the downward trend. Coming just a week after January inflation unexpectedly ticked up to 2.9%, this borrowing figure puts the government’s fiscal targets in doubt. Create your live VT Markets account and start trading now.

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Germany’s Producer Price Index (PPI) fell by 0.5% month-on-month in February. This was below the expected rise of 0.3%. The result shows producer prices declined over the month rather than increasing. The gap between the forecast and the actual outcome was 0.8 percentage points.

German Ppi Surprise Signals Faster Disinflation

The surprise drop in German producer prices to -0.5% against an expected rise is a significant disinflationary signal. This reinforces the view that inflation is cooling faster than the European Central Bank has anticipated. We should expect markets to increase bets on an earlier ECB rate cut, possibly as soon as their next meeting. For interest rate traders, this means we should be looking at buying futures contracts on German bunds and other European government bonds, as their prices will rise if yields fall. We are already seeing the market price in a higher probability of a rate cut in the second quarter, with swap markets now suggesting a nearly 85% chance. Looking back from 2025, we saw how quickly sentiment shifted on rates during the 2023-2024 period, and this data point could trigger a similar rush. This news creates a dilemma for equity markets, particularly the German DAX index, which has been hovering near its record highs. While lower interest rates are positive for stock valuations, falling producer prices can signal a weakening economy and lower corporate profits ahead. We believe using options to hedge is wise, such as buying put options on the DAX to protect against a potential downturn driven by poor earnings guidance. On the currency front, the Euro is likely to weaken following this data. The growing divergence between a dovish ECB and a still-cautious U.S. Federal Reserve, which saw its own inflation figures remain steady last week, makes the US dollar more attractive. We anticipate a move in the EUR/USD pair towards the 1.06 level we last tested in late 2025, making short positions on the Euro via futures or options attractive. The sharp deviation from expectations will increase market uncertainty and likely boost volatility. The VSTOXX, which measures Eurozone equity volatility, has already ticked up this morning, showing early signs of nervousness.

Volatility Strategies As Uncertainty Rises

This environment makes selling volatility through strategies like iron condors on broad European indices potentially profitable for those who believe the market reaction will be contained within a new, lower range. Create your live VT Markets account and start trading now.

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AUD/USD rose modestly to near 0.7090 in early European trading on Friday. Price action stayed neutral with a mild bullish tilt, and consolidation remained possible as RSI momentum was neutral. The Australian Dollar gained after the Reserve Bank of Australia raised its Official Cash Rate by 25 basis points to 4.10% at its March meeting. This was the second consecutive hike this year, following another 25 bps increase in February.

Australian Data And Central Bank Policy

Australia’s February job growth was stronger than expected and the Unemployment Rate held steady. These data supported the view that the economy can handle higher rates. Demand for the US Dollar could rise if the US-Israel war with Iran intensifies. Israel said it “acted alone” in a strike on Iran’s South Pars gas field, and Iran reported missile and drone strikes and attacks on US bases and energy sites in Qatar, Saudi Arabia, and the UAE. On the chart, AUD/USD held above the rising 100-day exponential moving average near 0.6860 and traded in the upper half of the Bollinger Band range. Support was at 0.7050 then 0.7000, with 0.6920–0.6900 next; resistance was at 0.7125 then 0.7150, with 0.7200 above. Looking back a year, we recall the Australian dollar was trading with a mild bullish tone near 0.7090. At that time in March 2025, the Reserve Bank of Australia was aggressively hawkish, having just lifted its cash rate to 4.10% to combat persistent inflation. That environment, coupled with strong jobs data, provided a solid tailwind for the Aussie. The situation today is markedly different, as the RBA has since shifted its stance in response to cooling inflation. The official cash rate now stands at 3.35%, following two cuts in late 2025, as the latest quarterly CPI data showed inflation falling to 3.4%. This policy divergence explains why AUD/USD is now struggling to hold gains around the 0.6680 level, a significant drop from the levels seen last year.

Volatility And Strategy Considerations

That geopolitical tension from 2025, with the conflict involving the US, Israel, and Iran, had kept implied volatility elevated, making options strategies expensive. Today, with geopolitical risks having subsided, implied volatility for AUD/USD has fallen to near 18-month lows. This presents a cheaper opportunity for traders to use options, such as buying straddles, to position for a potential breakout if economic data surprises. While the support level of 0.7050 was a key floor last year, our focus has now shifted much lower. The critical support for the coming weeks sits near the 0.6600 psychological level, with any break below threatening a move toward the 2025 lows. On the upside, selling call spreads with a strike price near the formidable resistance at 0.6750 could be a prudent strategy, capitalizing on the currently weak sentiment. Create your live VT Markets account and start trading now.

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WTI futures on NYMEX fell by over 1% to about $93.10 in early European trading on Friday, after failing to move back above $100.00. The drop followed easing worries about energy supply linked to the Middle East conflict. Israel’s Prime Minister Benjamin Netanyahu said Israel would not repeat attacks on Iranian gas fields, after a request from US President Donald Trump, according to CNN. The Israeli Defense Forces had earlier attacked Iran’s South Pars gas field, described as the world’s largest gas field.

Supply Risks Ease

US Treasury Secretary Scott Bessent said on Fox Business Network that the US may remove sanctions on Iranian oil already on the water in coming days. This added to expectations of fewer constraints on supply. Oil demand concerns also rose after hawkish comments from central banks, as inflation expectations increased due to higher energy prices. This combination added pressure to WTI. WTI traded near $93.10 while holding above the rising 20-day EMA of about $84.70. The 14-day RSI fell to 66.8 from readings above 80, pointing to weaker upward momentum. Support is seen near $84.70, with further support around $80.00 if that level breaks. Resistance remains at $100.00, and a daily close above it could reopen the move towards $113.80.

Key Levels In Focus

Looking back at the events of 2025, the sharp rejection from the $100 mark showed how quickly supply sentiment can turn on geopolitical news. That pullback was driven by signs of de-escalation between Israel and Iran, which temporarily eased market fears. The memory of that volatility, however, is keeping options pricing elevated even today. Currently, the supply picture is tightening once again, contrasting with the situation we saw after those de-escalation talks last year. Recent EIA data shows global petroleum inventories fell by over 12 million barrels last month, and OPEC+ has signaled it will maintain its production discipline through the second quarter. This renewed fundamental tightness suggests the path of least resistance for prices may be upwards. The technical levels from that 2025 correction are now critical reference points for the market. The $84.70 area, which was the 20-day moving average back then, has since become a major floor of support that has been tested and held multiple times. We see the $100 level from last year’s conflict as a significant psychological barrier that will require strong momentum to overcome. Given this context, we see traders positioning for a gradual move higher rather than an explosive one. Bull call spreads are becoming popular, such as buying a May $90 call and selling a May $98 call to finance it. This strategy profits from a rise in WTI prices while capping both the potential profit and the upfront cost. For those expecting more sideways action before a breakout, selling puts or put spreads below the key $85 support zone is a viable strategy. This approach collects premium based on the belief that the market has found a solid base after last year’s turbulence. It benefits from time decay and the still-high implied volatility lingering from those past geopolitical flare-ups. Create your live VT Markets account and start trading now.

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USD/CHF rose to about 0.7890 in early European trade on Friday, as the US Dollar recovered after a sharp fall the day before. The move came as the US Dollar Index (DXY) was up 0.3% at around 99.45. Market pricing points to the Federal Reserve keeping interest rates unchanged through the year. CME FedWatch shows nearly 72% odds that rates will be held steady or remain above the current 3.50%–3.75% range at the December meeting.

Swiss Franc Policy Focus

The Swiss Franc remained sensitive to possible action by the Swiss National Bank to limit fast gains in the currency. The SNB left its policy rate unchanged at 0% on Thursday and stated it was ready to intervene in foreign exchange markets to curb rapid Swiss Franc appreciation. We remember looking at the market in 2025 when USD/CHF was struggling below 0.7900. At that time, the discussion was about the Federal Reserve holding rates around 3.75% while the Swiss National Bank was at zero. That environment suggested the SNB would have to actively fight to weaken the franc. Fast forward to today, March 20, 2026, and the picture is dramatically different with the pair now trading near 0.9150. The Fed has since held rates firm in the 4.75%-5.00% range, while the SNB has brought its own policy rate up to 1.50%. This significant policy divergence is the main reason for the dollar’s sustained strength against the franc. The dollar’s position is reinforced by a resilient US economy, with the last jobs report showing a solid gain of over 250,000 positions. US inflation, while lower than its peak, remains stubbornly above target at 2.8%, giving the Fed very little room to consider rate cuts. This backdrop makes strategies that benefit from a stable or rising dollar attractive.

Shifting SNB Priorities

Meanwhile, the SNB’s old promise to intervene against franc appreciation, a major theme in 2025, is no longer a factor. With Switzerland’s own inflation recently surprising to the upside at 1.9%, the central bank is now more focused on price stability than on actively weakening its currency. This removes a major headwind that previously capped USD/CHF gains. Given this environment, traders should anticipate that volatility may increase as markets price in continued policy differences. A sensible approach in the coming weeks would be to use options to position for further, gradual USD/CHF strength, perhaps by buying call spreads. This allows participation in potential upside while defining the risk if the economic data were to suddenly shift. Create your live VT Markets account and start trading now.

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EUR/GBP fell to about 0.8620 in early European trading on Friday, moving below 0.8650. The Pound rose slightly against the Euro after rate decisions from the Bank of England and the European Central Bank. The Bank of England kept its interest rate unchanged at 3.75% at its March meeting on Thursday. The Governor said the Middle East conflict is expected to raise inflation in the near term, and referred to shipping through the Strait of Hormuz in relation to energy prices.

Central Bank Decisions And Market Reaction

The European Central Bank also left interest rates unchanged at its meeting on Thursday. It said the war in Iran has made the outlook more uncertain, with risks of higher inflation and weaker economic growth. After the ECB decision, market pricing shifted towards possible ECB rate rises later this year. EUR/GBP continued to trade lower following the two central bank announcements. We remember how last year’s geopolitical turmoil in the Middle East set the stage for central bank divergence. The concerns voiced by the BoE and ECB in March 2025 have since played out, cementing a downward trend in EUR/GBP. This policy gap is likely to remain the key driver for the pair in the near term. Recent data from February 2026 confirms this split, with UK core inflation proving sticky at 3.1% while Eurozone HICP has eased to 2.5%. This divergence underpins the BoE’s current 4.0% bank rate, a full 50 basis points above the ECB’s main refinancing rate. Consequently, options markets are showing lower implied volatility for downside strikes, suggesting a strong consensus for further GBP strength.

Trade Setup And Key Risk Factors

For the coming weeks, we see opportunities in strategies that benefit from a continued grind lower in EUR/GBP. Buying put options or establishing put spreads on the pair offers a defined-risk way to position for a test of the 0.8500 level. These positions capitalize on the interest rate differential that favors holding Sterling over the Euro. The primary risk remains a sudden de-escalation in the Middle East, which could cause a sharp drop in energy prices and ease pressure on the BoE. We saw a similar pattern in late 2022 when a temporary dip in gas prices caused a brief rally in the pair. Therefore, watching Brent crude futures for any sign of a break below $90 a barrel is critical for risk management. Create your live VT Markets account and start trading now.

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Gold prices in Saudi Arabia rose on Friday, based on FXStreet data. Gold was priced at SAR 569.77 per gram, up from SAR 561.34 on Thursday. Per tola, gold increased to SAR 6,645.70 from SAR 6,547.41 a day earlier. Other listed prices were SAR 5,697.73 for 10 grams and SAR 17,721.96 per troy ounce.

Saudi Gold Price Update

FXStreet calculates Saudi gold prices by converting international prices using the USD/SAR rate and local measurement units. Prices are updated daily using market rates at the time of publication, and local rates may differ slightly. Central banks are the largest holders of gold. They added 1,136 tonnes worth about $70 billion to reserves in 2022, according to the World Gold Council, the highest annual total since records began. Gold often moves inversely to the US Dollar and US Treasuries and can also move against risk assets such as equities. Its price can also be influenced by geopolitical events, recession fears, and interest rates. The recent increase in gold prices reflects a wider market trend driven by shifting interest rate expectations. With the Federal Reserve signaling a potential pivot away from the tighter monetary policy we saw through much of 2025, the environment for non-yielding assets like gold is improving. This makes the metal more attractive compared to assets that pay interest.

Market Drivers And Trading Outlook

We are seeing this play out as the US Dollar Index has softened, dropping nearly 3% since its peak last quarter to around 101.50. This inverse relationship is a classic driver for gold, making it cheaper for holders of other currencies. We also note that central banks continued their strong buying through 2025, absorbing over 1,000 tonnes for the third consecutive year and providing a solid floor for prices. For derivative traders, this suggests a strategy of buying call options on gold futures or related ETFs for the coming weeks. This approach allows for participation in potential upside while strictly defining the maximum risk to the premium paid. Given the uncertainty around the exact timing of the first rate cut, long call options offer a favorable risk-reward profile. Implied volatility in the options market has risen, indicating that other traders are also anticipating a significant price move. Looking back from 2025, this setup is reminiscent of the conditions we saw in late 2023 when the market first began pricing in rate cuts, which preceded a strong rally into early 2024. Therefore, establishing bullish positions now seems prudent before the trend fully accelerates. Create your live VT Markets account and start trading now.

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Gold prices in the Philippines rose on Friday, based on FXStreet data. Gold was priced at PHP 9,082.49 per gram, up from PHP 8,951.43 on Thursday. Gold increased to PHP 105,939.40 per tola from PHP 104,407.70 a day earlier. Other listed prices were PHP 90,825.17 for 10 grams and PHP 282,497.50 per troy ounce.

How FXStreet Converts Global Gold Prices

FXStreet converts international gold prices into local values using the USD/PHP exchange rate and local measurement units. Prices are updated daily using market rates at the time of publication, and are for reference as local rates may differ. Central banks are the largest holders of gold reserves. They added 1,136 tonnes of gold worth around $70 billion in 2022, according to the World Gold Council, the highest annual purchase since records began. Gold often moves inversely to the US Dollar and US Treasuries, and can also move opposite to risk assets such as equities. Prices may change due to geopolitical events, recession fears, interest rates, and shifts in the US Dollar, as gold is priced in dollars (XAU/USD). We are seeing gold prices firm up, which continues the strong trend from the past few years. This momentum reflects gold’s appeal as a safe-haven asset, especially after the price surged past previous records throughout 2025. Persistent geopolitical tensions and inflation concerns are keeping this demand steady.

Key Drivers Traders Are Watching

A significant force behind this price strength is the aggressive and sustained purchasing by central banks. Following the record-breaking additions we saw in 2022 and 2023, central banks, particularly those in emerging markets like China and India, have continued to diversify away from the dollar. This consistent buying provides a strong underlying support for the market. The inverse relationship between gold and the US dollar remains a key factor for traders to watch. The US Federal Reserve’s shift away from the restrictive monetary policy of 2023-2024 has put moderate pressure on the dollar, making gold more attractive. A lower interest rate environment reduces the opportunity cost of holding a non-yielding asset like gold bullion. For the coming weeks, derivative traders should consider using call options to gain exposure to potential upside. While gold has already had a significant run, this strategy allows for participation in further gains with a clearly defined and limited risk. This is particularly useful in case the market experiences a short-term pullback or a period of consolidation. Alternatively, for those expecting a more gradual rise, a bull call spread is a viable strategy. This approach involves buying a call option and simultaneously selling another call option with a higher strike price, which lowers the overall cost of the trade. It is an effective way to profit from a moderately bullish outlook without paying the full premium for a simple long call. Create your live VT Markets account and start trading now.

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Gold prices rose in the United Arab Emirates on Friday, based on FXStreet data. Gold was priced at AED 557.52 per gram, up from AED 549.05 on Thursday. The price per tola increased to AED 6,502.77 from AED 6,404.07 a day earlier. Other listed prices were AED 5,575.21 for 10 grams and AED 17,340.72 per troy ounce.

Gold Pricing Reference In The UAE

FXStreet converts international gold prices into AED using the USD/AED rate and local measurement units. The figures are updated daily at the time of publication and are provided as a reference, with local prices potentially varying. Central banks are the largest holders of gold. World Gold Council data shows central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest annual total since records began. Gold prices often move against the US Dollar and US Treasuries, and can also move opposite to risk assets such as shares. Prices may also react to geopolitical events, recession fears, and interest rate changes, as gold does not offer a yield. The recent strength in gold prices reflects growing market uncertainty about the path of interest rates. Following the US Federal Reserve’s decision last week to pause on further rate cuts, investors are reconsidering the economic outlook. This sentiment was reinforced when the latest US jobs report for February 2026 showed a slight cooling, increasing demand for safe-haven assets.

Market Drivers And Trading Positioning

We should also note the persistent demand from central banks, which continues to provide a solid floor for prices. The World Gold Council confirmed that the trend of strong net purchases seen throughout 2025 has carried into the first quarter of 2026, with over 200 tonnes added globally so far. This consistent buying from major institutions is a key factor supporting the current price levels. While gold typically has an inverse relationship with the US Dollar, the dollar’s recent sideways consolidation has failed to create a significant headwind. We see this as a sign of gold’s underlying strength, driven more by geopolitical tensions and concerns over stalling equity markets. The S&P 500, for example, has struggled to push past its highs from January 2026, making gold a more attractive alternative. For derivative traders, this suggests implied volatility is likely to remain elevated in the coming weeks. Buying call options or using bull call spreads could be effective ways to gain exposure to potential upside moves. The current environment makes holding some long gold exposure a sensible strategy to hedge against a sudden downturn in risk assets. This situation is reminiscent of the market action we observed in mid-2025 when fears of a slowdown first emerged, leading to a sharp rally in precious metals. Looking back, that period showed how quickly capital can flow into gold when the economic narrative shifts. The Fed’s current pause could easily be the trigger for a similar flight to quality if the next round of economic data disappoints. Create your live VT Markets account and start trading now.

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